Phoenix Real Estate Market Keeps Tanking (Surprise: FSBO, marketplace, safe)

[MN-Born-n-Raised]

Originally Posted by oldtrader

We have to consider one factor that many are overlooking. In the Phoenix metro area, 52.5 percent of 486,466 residential properties with a mortgage had negative equity. In addition a large number are just above negative equity. These numbers are only beat out by Nevada.

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There are two ways to look at this. You can worry that the sky will soon fall and assume that the only reason people haven't left their home is because of the "shadow inventory" where banks let people live in the homes for free.

I look at it a different way. The vast majority of people who are upside down cannot move or list their property for sale. This is a key reason why their is a shortfall in preexisting homes. Once the perceived bottom has hit, homes have been gobbled up by the thousands. Additionally there have been a lot of loan modifications that have removed the desire for able-paying owners to strategically default. Even if many people wanted to strategically default, (many but not all) they have done the math and realized that they are going to pay more or about the same to rent their home back from an investor. Remember, the investor wants a return. As the prices push upwards, less and less people will have the economic desire to walk.

In summary, there are economical reason why people who are upside down are still paying. Round one, two and three of the Phoenix foreclosure crisis is over. If your numbers are correct, then you need to understand why those underwater owners haven't aborted. The fearful home buyers who stare at those numbers (even though there were INCREDIBLE DEALS) just left thousands of dollars on the table.

[Captain Bill]

Originally Posted by PhinsFan1

So, stipulating that you don't have a crystal ball so you obviously can't predict the future, and also stipulating that no great disasters, wars, interest rate changes, etc., occur....can you guesstimate what the sale price/sq ft will be around late summer/early fall 2013? I know it's a ridiculous question, but I'm curious what you think. Specifically, I'm curious about the southeast Gilbert area. A friend who owns a few investment properties told me the other day that it's feeling to him like it felt at the beginning of the last "bubble" (early/mid 2000's), with prices increasing, and he thinks it's going to continue through next year. At the rate it's increasing now, it would seem that by next fall, prices in SE Gilbert could get back up to 120/sq ft, like they were 5 years ago, yes?

Again, I know you can't say for sure, and a lot can happen between now and then....

Let's use the Cromford Report prediction of 25% increase by September.

In January the Gilbert average price/sf was 88.57. If it increases by 25%, that would be $110.70/sf by September.

Southeast Gilbert is zip code 85298. The average price per square foot there in January was $96.01. Today it is $108.85. If we get the 25% increase from Jan, the average price/sf in Sept should be $120.01.

In Seville, excluding a few homes on the golf course, and the large custom homes in Seville Circle G, there are 9 homes Active on the market. The average listed price is $115/sf now. One relocation home is listed at $73/sf. The next lowest is $102, and they go up to $135/sf.

[snip]
It's probably early to predict what prices will be in 2013, especially since we don't know what will happen during the slow season. But as we approach September the Cromford Report statistics may give us an indication as to how the prices should go.

[ReadyFreddy]

Average price is determined by adding together prices of all homes sold, and dividing by number of homes sold. Less cheap homes sold, and the average goes up. Mean is determined by finding how many homes have been sold, finding the half way point between the cheapest home and the highest price home, and that is the mean. Less cheap homes moves the mean to the right and higher mean prices.

I would replace all instances of MEAN above with MEDIAN, and AVERAGE with MEAN (though 'average' can mean MEAN or MEDIAN).

With homes and incomes and things like that we usually look at median because a few large outlier values can skew the mean.

In summary, there are economical reason why people who are upside down are still paying. Round one, two and three of the Phoenix foreclosure crisis is over. If your numbers are correct, then you need to understand why those underwater owners haven't aborted.

This is probably part of your point but there are a lot of non-economics-based reasons not everyone $1 underwater strategically defaults, too. People value their credit and honoring their obligations, they may not even know they're underwater or care because they have no intention of selling so it's a 'paper loss', they see defaulting as admitting an error in purchasing the house, they see losing your home as shameful, they refuse to rent again at any cost, etc.

I talked to Citimortgage about refi options for a friend and they're offering no cost refis to a lot of homeowners, that drastically lower their payments, with no need to show hardship or anything. I think that's another thing that'll keep people in their homes... lower payments and a cheap rate. Though that's economic, of course.

[jimj]

Personally I think there are 3 things that will determine what's going to happen with home appreciation within the next year. 1.The election. 2. Gas prices 3. The perception of the economy at ground level to include food costs,inflation and unemployment rate or stability of people's current job.
In a nutshell consumer sentiment and as stupid as it may sound the "hope" that things are getting better will be what drives the housing market.
It's "possible" to have euphoria set in like with the stock market and we'd see prices rocket up and then level out.
*As a quick disclaimer, when I say "rocket up" I mean move from way below cost to build that many of us paid a year or two ago up to (or close to) actual cost to build it now.
If we got a run up to what it'd cost to replace this house today we'd be very pleased.

[khuntrevor]

Trader, there are tons more jobs here, than Vegas. For many, being underwater doesn't matter.

[amatrine]

Our value is less than half, we did not walk.
A few reasons.

1: We did not buy our home as an investment. We plan on living here a long time.

2: It would cost more to rent.

3: We put a lot of work into this house an upgrades, and it is the way we like it.


We also put money down. Now, if we were to walk?

1. Ruins Credit.
2. May not be able to buy again with my medical debt.
3. I have known many that have walked, its been over two years , and even with their credit still HIGH... they can not get financed.

The market will go back up. Maybe in ten years, but I plan on still being here in AZ till die, I can afford my mortgage, got a low interest rate. Staying put.

I am sure there are many like me. Just depends how you look at your home.

[PhinsFan1]

Thanks. That's kind of what I was figuring too, but wanted to hear from a more informed and knowledgable person. I'm keeping all my fingers crossed that the appreciation continues. But, yes, it's a long way off and a lot can happen between now and then...

Thanks!!

Originally Posted by Captain Bill

Let's use the Cromford Report prediction of 25% increase by September.

In January the Gilbert average price/sf was 88.57. If it increases by 25%, that would be $110.70/sf by September.

Southeast Gilbert is zip code 85298. The average price per square foot there in January was $96.01. Today it is $108.85. If we get the 25% increase from Jan, the average price/sf in Sept should be $120.01.

In Seville, excluding a few homes on the golf course, and the large custom homes in Seville Circle G, there are 9 homes Active on the market. The average listed price is $115/sf now. One relocation home is listed at $73/sf. The next lowest is $102, and they go up to $135/sf.

[snip]
It's probably early to predict what prices will be in 2013, especially since we don't know what will happen during the slow season. But as we approach September the Cromford Report statistics may give us an indication as to how the prices should go.

[Steve Pickering]

There are way to many realtors posting here

[ReadyFreddy]

3?

[Guitarmaan]

Originally Posted by Steve Pickering

There are way to many realtors posting here

Agreed. Helpful information is one thing, but endless property ramping is something else. Thanks for saying what I was thinking.